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Case background
Jetblue Airline Company was incorporated in United States of America as a low cost Airline in August 1998. Its founder was David Neelaman. The company aims at offering a different experience to its passengers it follows southwest’s airlines approach of low cost freights. Its main airport is John F. Kennedy International airline. For five consecutive years the company has been voted as the best domestic carrier.
To maintain these high standards, and remain competitive in the fast developing United States Airline Industry, the company employ’s different management strategies (Jetblue official website, 2010). This paper takes a look on changes in United States Airline industry, how the changes affect Jetblue and then evaluate strategies set by the company.
United States Airline industry developments
Invention of airline and increased globalization has necessitated the growth of airline companies. In United States, being the world largest economy, has embarked on massive invention in airline industry. The industry is divided into four categories and each category has its changes, some changes cut across. The categories and changes are;
International
They are planes which carry a capacity of 130 seats and over they have ability to take international routes and revenue of over $1 billion.
National
They have a capacity of lea than 130 in capacity. Their revenues base is between $100million and $1 billion.
Regional
They specialize in regional short freights and revenue less than $100 million
Cargo: they transport goods.
The greatest change in airline industry that will impact Jetblue is the change to Low cost airlines. These are airline service providers who are able to offer services at a reduced rate by eliminating some traditional favors given on planes. It has a cost cutting approach.
Competition in this sector has lead to innovations an increased customer service and reduced cost of operation. Some of the airlines operating as low cost in United States are Southwest airlines, Virgin Atlantic and Sun Country Airline.
There is an influx of international plane operators who are connecting routes. They pass by Unites States and take passenger/cargo to their final destination. The influx has lead to price wars (Anon, 2008).
Jetblue airline strategies
The company’s management recognizes the use of information available in the market and internal information. To analyze the market and derive a competitive advantage, the company undertakes regular internal and external audits. The information derived is used to make strategic decisions.
Understanding what its competitors are offering and then offering better services is a strategy adopted by the company. Right from its incorporation, it has tool a similar approach like southwest airline but aimed at differentiating its products by offering an improved customer service. It offers snacks and food to passengers aboard a plane.
Diversification is another approach that it has adopted; other than focusing on domestic industry alone, the company has extended its services to Caribbean countries. It also flies to Central and South American routes. The reason behind diversification is to tap a large market and enjoy economies of scale one of attributes used by low cost airlines.
Good customer service and technological development are other strategies implemented. Customer service has lead to customer loyalty.
The company was awarded the best customer service provider in airline industry in America in 2010. Another notable move by the company was on February 14th 2007, when freights were cancelling due to falling snow, the companies director wrote an apology message to all affected people (Ricky, 2004)..
Financial obligation of the company
The company is responsible to meet its short term, medium term and long term financial obligations. Investors, creditors and the government. The company employs a just in time supply management systems where it ensures that it has an adequate supply of goods and services. It has a strong supply chain that functions for the better of the company.
According to financial statements released for 2009, the company though tough economic times experienced in 2009 recorded a profits in all four quarters of the years. It generated over $58million. Its operating margin was 8.5%. this money can be used to pay dividends and taxes to the government.
In the same year the report said that it hand over $1billion in cash and short term securities. This is working capital that is used to meet short term financial obligations. The company thus has a strong financial strength to meet short term and long term financial obligations (Jetblue official website, 2010)..
Strategic elements
Costs
The airline has put on measures that ensure that there is increased efficiency in its operations. It employs a Six sigma management procedure where it aims at creating efficiency in its processes. It detects defects in various areas and addresses them before they paralyze the entire company.
In freight industry fuel cost takes the highest proportion of costs, the company has bought fuel efficient jets with an average of four years. Staff has also been taught how to multitask and still maintain a high customer service.
Organizational culture
The company has a freelance culture where staffs are given the freedom to express their feeling and make recommendations they would like done on the processes. After each fright an officer in charge is supposed to give an analysis of any issue that they may have encountered when in the freight.
These are the basis that is used for making decisions in the airline. Notable competitive advantage strategies that were recommended by cabin crews were plane entertainments. In response to this the company installed video players in their planes and XM radio was installed by Live TV. This increased customer service. Managers and subordinates interact freely.
Staff
The company employs high competent staffs. Currently the total number of staff is over 12000 dedicated staff. Human resource management is well structured and offers a career path to these staff. Salaries paid to employees are slightly higher than normal industry rate average. There are different motivational measures, both monetary and non monetary measures adopted to ensure a motivated staff work force is maintained.
Highly motivated staff, positive organizational culture and reduced cost of product leads to a competitive advantage. The staff is innovative and thus helps management make informed decisions. With reduced costs profit margins will be increased and the company will be able to survive competitively in low cost airline industry (Wynbrandt, 2004)..
Jet Blue’s strategies for 2008 and their effectiveness
Year 2008 was a year with financial difficulties resulting from global financial crisis that affected world economies in 2007. in response to these crisis and development of policies to see the company into the future, the company has embarked on management strategies to remain competitive. The following are some of the policies;
Customer service
The company has implemented measures that ensure more satisfied customers. Customers are offered online help in case there is an issue, booking and checking in can also be done online. Customers are also entertained when aboard a plane. This is aimed at developing a strong brand name and customer loyalty.
Efficiency
The company has embarked on massive efficiency creation policies. These policies include adopting a six sigma management processes. This is on plane expenses, goods and services provision. Total quality management (T.Q.M.) policies are put in place to ensure that all departments maintain high standards. There is an efficient supply chain management that ensures that there is quality good to the company at one time.
Research and development
The company has embarked on scientific decision making which are as a result of data gathered from the market. To make decisions the company first interpolates its strengths and weaknesses (S.W.O.T.) analysis.
The approach undertaken by the company will ensure that decisions made are effective and lead to a competitive advantage.
Policies adopted by the airline company are likely to be sustainable and continue offering it a competitive advantage. The focus is all rounds and an interpolation of internal and external assist management in making futuristic decisions. They are simple policies which effect will go along way making the company competitive (Thompson, Strickland & Gamble, 2010).
Conclusion
The world business is changing with globalization. Airline business has changed drastically with the invention of low cost airlines. Jetblue is a US based low cost company. It is has implemented strategies to assist in sail in the changing United States Airline industry.
The focus of these policies is on continuous innovations of new cost reduction mechanisms, customer loyalty and satisfaction strategies and finally it empowers its staff to be creative and innovative. The company aims at offering a different experience to its passengers it follows southwest’s airlines approach of low cost freights. Its main airport is John F. Kennedy International airline.
References
Anon.(2008). “News from the Airways.” Airways: A Global Review of Commercial Flight. February 2008: 2.
Jetblue official website.(2010). Web.
Ricky W. (2004). Fundamentals of Management. New York: Cengage Publishing Company.
Thompson, A.., Strickland, A.J., & Gamble, J.E. (2010). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases: 2009 custom edition (17th ed.). New York, NY: McGraw-Hill-Irwin.
Wynbrandt, J. (2004). Flying High. New York: John Wiley & Sons Inc (ISBN 0-47165-544-9).
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